In January, 2017, Camel Corporation purchased a mine for $2,550,000 with removable ore estimated by geological surveys at 1 million tons.The property has an estimated (residual)value of $150,000 after the ore has been extracted.The company incurred $750,000 in development costs preparing the mine for production.During 2017, 250,000 tons were removed and 200,000 tons were sold.What is the amount of depletion that Camel should expense for 2017?
A)$480,000
B)$600,000
C)$787,500
D)$840,000

Question

Quizplus · Accepted Answer

First, we need to calculate the depletion cost per ton:
Total Acquisition and Development Costs = $2,550,000 + $750,000 = $3,300,000
Depletion cost per ton = ($3,300,000 - $150,000 residual value) / 1,000,000 tons = $3.15 per ton

Depletion expense for 2017:
250,000 tons were removed, so depletion expense = 250,000 x $3.15 = $787,500 (Option C)

In January, 2017, Camel Corporation Purchased a Mine for $2,550,000